Marketing for Global Value Chain: The Czech Case
    Category: Column By : Hermawan Kartajaya Read : 1335 Date : Tuesday, August 06, 2013 - 05:46:00

    I have spoken many times about “Marketing for Diplomats” at Indonesia's Foreign Ministry. I offered my thoughts on Economic Diplomacy and taught at the Senior Diplomatic Training Course (Sesparlu) and Mid-Career Diplomatic Training Course (Sesdilu). This time around, however, it was quite different. The Czech Republic's Ambassador to Indonesia, Tomas Smetanka, invited me to speak on the same topic to economic diplomats at the Czech Republic's Ministry of Foreign Affairs in Prague. I have been for many years an honorary consul for the Czech Republic in East Java, Central Java and Yogyakarta.

    The event was well designed by the ministry's Director General of Economic Division Ivan Jukl. In the morning, Koenraad de Backer, a senior economist at OECD, spoke about Global Value Chain (GVC) in the interconnected economy. It is normal for a country to import a product from another country, add value to it and export it. The aim is to maximize the added value and create employment. Each country gets a certain level of benefit from upstream, midstream and downstream of a GVC, depending on the strategy.

    Apple's iPod is a prime example. The product is made in China, but the value that is added in China is less than 3% of the factory costs and less than 2% of the U.S. retail price. The value added in the U.S. however, where the product is designed and marketed, is very high.

    The Czech Republic is known for its production machinery and thus gets significant benefits from GVC. Improvement opportunities, Koen argued, should come from value added in innovation and marketing. I agree with this view. I have visited Skoda's automotive factory in the Czech Republic and its marketing office in the U.K. Originally a Czech brand, Skoda was bought by VW and transformed into a stronger brand through improved production processes and better marketing. The factory is sophisticated and highly automated. However, the image in the U.K., prior to marketing improvement, was poor. With a brand repositioning campaign, Skoda is now well perceived by the public.

    Michal Mincev, the morning event moderator and also an expert in bilateral economic relations and export promotion, argued that innovation is indeed important. Therefore, entrepreneurs in the country should have the courage to do disruptive innovation so that the Czech Republic will get a bigger portion of GVC benefits.

    Moderated by Ivan, I spoke on the topic of marketing with three key messages. First, the core of strategic marketing for a nation is not advertising, exhibition or promotion. It is also not trade missions to various countries. The real core is differentiation, which has to be continuously updated. If the differentiation is authentic, the value can go up.

    Secondly, if you are not a big player in the market, you have to be innovative and disrupt the market. If you are not the market leader, you have to be the “thought leader.” Finally, a value chain is a process, which centers on Quality, Cost and Delivery (QCD).  The Process should be aligned with differentiation to create integration between GVC, disruptive innovation and strategic marketing. In the afternoon Koen, Michal and I spoke on the same topic to the Confederation of Industry of the Czech Republic. Therefore, diplomats in the “frontline” and corporations in the “backroom” got the same inspiration.